The upper green curve represents TECHNICAL DATA
regarding world reserves proven and probable, backdated to the year of discovery,
collected by Jean Laherrère " from the individual estimates of every field in the
world outside the US (about 20,000 fields) and the USGS revised estimates of past US
annual discoveries (about 30 000 fields). I have in my computer all 20,000 fields outside
the US and the 400 US major oil fields (over 100 Mb)."

The other lines (4 bunched together) represent current releases from the World Oil journal (WO), Oil & Gas
Journal (OGJ), BP Review, and the American Petroleum Institute (API). These 4 sources are here
called 'political data', as explained below.

NOTICE the major difference between the upper green
line for technical data (a smooth up and over bell curve) compared to the other
4 lines (almost always rising, and bunched together, intersecting in 1990, then ceasing
their upward march - - and more recently getting 'religion' as discussed below).

The green line for technical data shows world oil
reserve increases (from new discovery data catch-up minus production) started slowing down
in the mid-1960s. World reserves of record then peaked in the late 1970s per this chart
at about 1,200 Gb (1.2 trillion barrels) and continuously trended down since then to less
than 1,000 Gb (1 trillion barrels) due to production depletion.

On the other hand - - The 4 'political data' curves appear most suspect. Their
plots act as if true reserves were, for some reason, understated from 1950 to 1990 when
compared to the technical data curve. Additionally, these 4 curves show constantly growing
reserves over this period, acting as if new oil discovery volume potentials were far
exceeding world oil production from 1950-1985 - - and then magically zooming upward
in the 3-year period 1985-88 at the fastest pace in history. The next apparent anomaly was
in the early 1990s when the chart shows an abrupt departure - - from zooming upward
trends of the past to a sudden dead stop!!

This abruptness of change (and the other points raised) of all 'political data' curves
appears most unrealistic - - and it further calls into question the accuracy of
data prior to the mid-1990s. The data unrealistically appears to try and convince an
observer that, all of a sudden, huge new discoveries were magically found 'under the
rug' causing soaring world oil reserves and then, again all of a sudden, that stopped
dead. Could this be true, or were 'reserve inflation' games being played? (the
answer is below on Data Manipulation Games).

It appears as if the 'political data' curves were understated in prior years, then
over-stated about 1990 - - BUT now are showing signs of coming closer to the green
technical data curve - - as they level off and drop. (it is not the purpose of this report
to question why such political data was presented to the
public).

This chart also shows a past 'follow-the-crowd' approach to world oil reserves, as one
looks at the unrealistic way by which all 4 'political data' sources bunched together for
50 years. This indicates that perhaps none of those 4 sources have been producing their
own data independent of the others. It's as if the 4 'political data' sources subscribed
to the same source, and just copy.

However, the chart shows that the black curve from the World Oil (WO) publication ,
with its major adjustment in the latter part of the 1990s, and therefore, for the first
time, it is coming closer to the technical data curve
and departing from the other 3 sources).

The chart shows those 4 sources seem to be getting a little 'religion' in the last
several years as steep increases in reserves reported in the past all of a sudden seem
to have evaporated.

Summary:
This graphic makes a strong argument in favor of accepting the technical
data green curve as more accurate regarding World Oil Reserves than blindly
accepting the other 'political data' sources, past or
projected.

AND - - World Oil reserves peaked 20 years ago and are now declining
at an accelerating rate. Chart by Michael Hodges, data provided
by Jean Laherrère

In the end, TECHNICAL DATA MUST PREVAIL!!- - A chart coming up next will help
clarify the above with a break-down of this World reserve chart, into Persian Gulf and
non-Persian Gulf Reserves - -

-
as we consider this chart keep in mind - -
- - the Middle East region (the bulk of OPEC) does NOT (up to now) produce at its
full capacity
- - regions outside the Persian Gulf generally DO produce at near full capacity.

The chart above showed world reserves by technical vs. political
data.

The chart at the left divides the world's total oil reserves (solid
green curve) from all producers in 2003 of about 1,000 Gb (1 trillion
barrels) into two parts:

1. Middle East producers (solid blue
curve) (the majority of OPEC) have reserves of about 570 Gb (57% of the
world's reserves)

2. Non- Middle East producers (solid red
curve), meaning the rest of the world's producers of about 430 Gb (43% of
world reserves).

- - each plotted with technical data (solid curves) vs. some political data as reported
by World Oil (WO) and Oil & Gas Journal (OGJ).
(don't be afraid of a chart with many curves, it will be explained).

(Note - Middle East producers, sometimes referred to as the 'swing producers' because
they restrain their production, are Saudi Arabia, Kuwait, Iran, Iraq and Abu Dhabi)

- (1) The top green curve represents World Reserves fromtechnical data, the same
curve as shown at the top of the first chart above, where world oil reserves peaked about
1980, thereafter trending down faster and faster. (a typically expected bell-shape
curve).
- (2) The middle solid blue curve is
for Middle East reserves from technical data, peaking
late 1970s, and thereafter declining faster and faster. (it is expected in the future that
this curve will also form the downward slope of the typical bell-shape). (Persian Gulf
nations up to now have NOT produced at full capacity - - thereby conserving their reserves).
- (3) The solid red curve is technical data for
reserves of the non-Middle East regions of the world -
- being the rest of the world in total such as the USA, Russia, Venezuela, Canada, Mexico
and others, peaking early1980s, leveling-out to late 1980s and thereafter rapidly
declining - - along a typically expected bell-shape curve (These nations generally
produce at full capacity, thereby more rapidly expending their reserves).

The other (non bold) lines represent reserves by the Oil & Gas Journal (OGJ) and
WO, which we refer to as 'political data:'
- (a) the green WO and OGJ data for world reserves show erratic behavior with large jumps
then large drops - - indicating inconsistency. Note the 44% jump in late 1980s, as if
there were huge new discoveries. Thereafter, erratic reporting from both sources despite
record production and consumption and no new significant discoveries. This is discussed in
(b) and (c) below and in Data Manipulation Games).

- (b) the blue data plots for OGJ & WO data for Middle
East reserves show most erratic behavior. OGJ and WO data
plots jump 57% by 1986-1989, as if 57% of all middle east reserves were just
discovered in those 3 years - - after which basically flat reserves despite large
production and no further discoveries were made in the next 11 years. That graphic jump,
of course, makes prior data appear most suspect. And, of course, there are some political
reasons for such data - - such as OPEC's production quota games for a given country member
are partly based on that nation's reserves, so since most members want to maximize
production revenue they have an incentive to cheat by inflating what they call their
reserves - - which did occur in that period - - thereby inflating middle east reserve
total above technical fact.

- (c) the red data plots for OGJ & WO data outside the Middle
east called non-Middle East (determined as World minus the middle
east) - - show reserve levels, measured by political data, remained nearly flat for the
past 3 decades - - as if new discoveries were sufficient to cover all production and then
all of a sudden this was not the case. Looking at red data on graph for WO data plots
shows a 32% jump in 1991 and then a 32% drop 5 years later in 1996.
Additionally, OGJ data plots jump up 50% from 2001 to 2002 as if non-middle east
reserves increased 50% in one year. All of this significantly conflicts with the technical data red curve which shows a reserve peak in 1980 and
rapidly declining thereafter.. ('The only thing that kept other curve relatively flat the
past 20 years was that in late 1987 Venezuela 'jumped' their reserves 124%, from 25 Gb to
56 Gb, whereas all other nations outside the Persian Gulf cannot play 'reserve number
games' since they have been producing all they can, which is at capacity').

The technical data curves include all known data, including Iran's claim to new
discovery at the South Pars gas field which was really a tap into Qatar's North Field, and
also includes new discoveries in deep waters, Caspian Kashagan and other places

Summary: as with the first chart on world reserve trends, this 2nd chart for
reserves of Middle East vs. other regions shows the power of the technical data over
'political data', and over financial data as well. And, this chart not only further
confirms the world's necessary increased reliance in the future on Middle East oil, but
that some political data attempts to say the Middle East has more reserves than proven by
technical data.

- - and, these charts also reconfirm the suspicion raised with regard to the earlier
charts on production projections from 'political data.'
- - and, this brings up the question: Do our political leaders have good grasp on the
total energy supply situation looking-forward because of poor data, or are they
(hopefully) relying only on technical data?

Lastly - - considering the wide use of 'political data' sources and the power
represented thereby it would not be surprising to hear many justifications why technical
data vs. political data presentations here should be thrown out the door - - because the
messenger is non-traditional.

But - This Energy Report's objective is to bring forward the information collected and
hopefully thereby encourage more realistic use of technical data of high quality by more
adequately-trained people. Challenges are welcome, since fact (not money or prestige) is
the objective.

Chart by Michael Hodges, data provided by Jean Laherrère

World Production - crude oil - - OPEC moving into major control

As stated in the second graphic on the Oil
Production - USA page, Oil discovery peaked in the U.S. during the 1930's, and production
peaked 40 years later in 1971. For the world as a whole, discovery peaked in the
1960's and the chart below shows the projection for the peak of world oil production.

Analysts divide the oil producing world into two halves: OPEC and the rest.
There is broad agreement that non-OPEC oil production will peak or at least plateau by
about 2010. ExxonMobil chief executive Rex Tillerson said in 2007 that non-OPEC production
growth would be all over in "two to three years".

This chart shows two things - - (1) total world crude oil production of
all producers per year in the past (solid lines), and (2) projected production in the
future - - with production data plots for total oil, OPEC only and Non-OPEC.

First look at the actual production 1920-2003 - -
The upper black line shows the history 1920-2003 for World
Crude Oil Production of all producers - - now about 70 million barrels per day
(as it is crude oil only, contrary to the demand in liquids which is about 76 Mb/d
including natural gas liquids, synthetic oils mainly from unconventional oils, refinery
gains and withdrawal).
The blue line is Non-OPEC (USA, Russia, Canada,
Mexico, North Sea, etc.) crude production for 1920-2003 (last year about 40
million barrels/day - - 60% of the world total).
The green line is the OPEC crude production
history (last year about 30 million barrels/day - - 40% of world total).

Several key points from this chart >
1. The non-OPEC producers (blue line), with
less reserves, are going trough their oil faster than OPEC producers. For 2003, non-OPEC
nations produced 60% of the world's total, yet they have remaining much fewer reserves
than OPEC (according to the reserves chart up this
page).
2. For some perspective > current production of the non-OPEC nations is shown as about
40 million barrels per day. Of this, Russia produces about 8 million barrels and the USA
about 5.7 million. So far Russia has been unable to produce to a late 1980 production peak
of 11 million per day, and we have already shown that USA oil production has been in
decline for years.
3. Production of non-OPEC nations (blue curve)
is projected to peak out in 2008 (just 4 years from now) and decline thereafter. We saw
from the US Production chart that USA production peaked many years ago with production now
below 1950 levels.
4. For the OPEC nations (green curve) of
about 30 million barrels per day of production last year, Saudi Arabia's share was about
10 million barrels, and Iraq, at best, at 2.5 million barrels.

For the year 2003, the chart shows total world
oil production (black curve) was 69.4 Mb/d (million barrels per day), which over
the 365 days of 2003 resulted in total production of about 25.3 Gb (billion barrels) that
year. The chart also shows for 2003 Non-OPEC's production
portion (blue curve) was 41.4 Mb/day (15.1 Gb for the year) or 60% of the
total and OPEC's production portion (green curve)
was 28 Mb/day (about 10.2 Gb for the year) or 40% of total world production that year.

So, we can see on this chart that OPEC's 2003 production was about 40% of
the world total production last year, yet the the reserves chart further up this page
shows the middle east alone (which does not include OPEC member Venezuela) has 57% of
world oil reserves. This means that as the non-middle east producers produce at near
maximum output they are running out of their smaller reserves much faster than the Middle
East.

Looking at the forecast (the dotted lines after 2003) one will notice that
total world crude oil production is forecast to peak by 2011 - - about 7 years
from now - - thereafter following rapid decreasing production levels. Non-OPEC production is forecast to peak in 2008
with OPEC's production to peak about 12
years later in 2020.

If we were to total all production in the past up to and including 2003,
then total crude oil production to date was about 930 Gb (billion barrels) - - of which
Non-OPEC's portion to date was about 560 Gb and OPEC's portion to date about 370 Gb.

Note the dip in the OPEC green
line for the early 1980s. Next note OPEC's increased production since then has been
less steep than in the past and has not yet even reached its peak production of the mid
1970s. (perhaps OPEC was then (and still is) conserving reserves while non-OPEC
producers were expending theirs as fast as they can pump. As Jean Laherrère states,
'There is a strong difference between the swing producers, i.e. the Persian Gulf (Saudi
Arabia, Iran, Iraq, Kuwait and Abu Dhabi) which produce less than their capacity and the
rest of the world (non-swinger) which produce at full capacity.')

Meanwhile, the non-OPEC blue line
(which includes production of the U.S., Canada, Mexico, Russia, Norway and some others)
increased up until late 1980s and then relatively flat production in the past 15 years.
(We noted in the first chart in the USA Energy section of this
Energy Report that U.S. oil production peaked in 1970 and since then has a declining
trend. Additionally, in comments with the import trend chart (in the USA section) we
read about declining reserves for several other non-OPEC nations, Canada and Mexico).

Now comes the interesting part - - Crude Oil production forecasts for
the future. This production graph also includes forecast projections for crude oil
production for total, non-OPEC and for OPEC - shown by the dotted data curves after 2003.
This future production forecast for total crude oil (the top curve on the
graph) is based on our model (a simple Hubbert cycle) taking
into account total remaining reserves at end of 2003 of about 1,000 Gb (see remaining
reserve chart above) to which we add 200 Gb for estimated future discovery - - which means
maximum future production is 1,200 Gb (or 1.2 Tb) of crude oil distributed per year as
shown. The same treatment is done by forecast curves for Non-OPEC (totaling 500 Gb from
2004 until exhausted, 42% of the total) and OPEC (totaling 700 Gb, 58 % of the total),
where we take their remaining reserves at end of 2003 and add their proportional part of
estimated future discovery. Notice the shift compared to the past, since
compared to the past when non-OPEC produced most of the oil looking forward OPEC must
account for most of future oil production since it has more reserves - - provided, of
course, world politics or war does not upset that possibility.

Jean says, 'It is most important to recognize the "no demand
constraint" in the chart's title. The model (a simple Hubbert cycle) is
showing what the supply may likely deliver if oil demand can use it but in the likely case
of economic constraint, as in 1979 with high price and most important high belief that oil
price would triple in the next 20 years economy savings led to a peak in 1979. I believe
there will not be a peak but a bumpy plateau instead, and future production will be below
my simple curve. But the area below production from 2004 to the end will remain the same
(being the remaining ultimate of 1.2 Tb). Adding the remaining 1.2 Tb to the approx. 930
Gb (0.9 Tb) production in the past gives the total from day one to exhaustion of 2.1 Tb
(trillion barrels), as also stated in the title.

Commenting additionally on oil production, link #30
states: U.S. production peaked in 1970, Russia in 1986, North Sea production may have
peaked in 2002, China in 2005-2006 (already importing more and more, now the world's 2nd
largest importer), Mexico in 2007, and Canadian production could reach its peak towards
the end of this decade. According to the above chart, OPEC production is predicted
to peak between about 2020, and non-OPEC supply will peak about 12 years earlier in 2008.

It is difficult to have cheap energy and security of the supply as California (see link #19 below) has discovered for gas. If the price goes down to 20$/b
in 2010 as DOE forecasts, it is difficult to see how the huge investments in deep water or
heavy oils will be financed. OPEC will not spend huge amounts of money to see the oil
price going down.

For me there is only one solution: it is to increase the oil price and the demand
will go down and the supply will meet the demand. The US will not put taxes as in
Europe. So the only way to have OPEC increase is to keep the price between 25 and 30 $/b -
- which will be good for renewables, for oil supply, for GTL. It was crazy to have in 1998
oil cheaper than bottled water. If OPEC does it, energy savings will come as in the 1970s
and the supply will meet the demand and they will be thanked later on."

Peak oil is reached when 50% of
known supplies have been used up. From that point forward supplies begin to decline. The
geologists believe that peak oil will arrive in this decade. We will know that
it has arrived only though hindsight. What we do know is that there have been no major oil
discoveries in the last 30 years. The last big discoveries were in Alaska in the late
60s and the North Sea in the early 70s. Both of these discoveries are now in
decline.

Large suppliers such as Venezuela, Iran, Iraq, and Kuwait peaked years ago. That leaves
only Saudi Arabia. Simmons believes Saudi production will have reached a peak when Ghawar,
their largest oil field, goes into decline.

For a more comprehensive 2001 Study of World Reserves by Jean Laherrère - paper
at IIASA International energy workshop June 19-21, 2001 at
http://www.iiasa.ac.at/Research/ECS/IEW2001/pdffiles/Papers/Laherrere-short.pdf (to Link #28)

"Technical data is from the individual estimates of every field in the
world outside the US and the USGS revised estimates of past annual discoveries."

'Political data' is called such "because they result from an inquiry upon
the national companies. The most used is from Oil & Gas Journal as it is the first
published, giving the estimates at the end of the year one or two weeks before the end of
the year. It could be only a political answer as the analytic study is not yet carried out
by the experts. Furthermore OGJ does not revise their estimates later on as World Oil
does. It takes several months for the DOE to get the data and the 1999 USDOE annual report
was published on September 2000. Most serious governmental agencies do not answer (as
Canada and France in 1999) and on the last estimates on the remaining reserves for end
2000 published by OGJ December 18, 2000 out of the 105 countries 84 countries
(representing 586 Gb out of the total oil world 1028 Gb and 4025 Tcf out of the total gas
world 5278 Tcf) are reported as no change as if the new discoveries have equaled exactly
the production, China has exactly 24 Gb every year since 1990 : it is a joke ! Furthermore
OGJ estimates are supposed to get accurate up to thousands barrels, the reported world
total being 1 028 457 585 kb ! As I am used to say, in the oil industry the accuracy is
about 10% and any author giving more than 3 significant digits shows his incompetence on
the subject and that the first digit is likely to be wrong (in fact it could 9 or 8
instead of 1).

Another factor for an increase is that it is proved reserves, very conservative
estimate which leads to strong revisions. The technical curve in our chart is the present
estimate of proven + probable reserves, backdated to the year of discovery, more truly
representing reality than the poor current reports of other sources. The best curve should
be to backdate to the year of development but the data is not complete enough to do so and
undeveloped reserves will disappear."

'Financial data' - - "I feel we should also mention the financial aspect of
the US data to indicate that the SEC (Security Exchange Commission), to please the
bankers, is upsetting the reporting by obliging the oil companies listed on the US stock
market to report only proved reserves, when in the rest of the world the national agencies
report proven + probable reserves. The US practice of reporting only proved reserves is a
poor practice leading to strong revisions of the reserves of old fields, as 90% of the
oil additions are from revisions of old fields. The resulting reserve 'growth' from
this poor practice is in fact used to claim that the increase is due to progress in
technology, when it is mainly poor reporting. Oil companies like this, since they
can show 'growth' without having to find any new discovery."
Jean Laherrère

To better understand these issues, including recent reserve downgrade by Shell BP, a
2004 article by Jean regarding reserves is at
http://www.oilcrisis.com/laherrere/ShellDecline2004.pd

In the graphics above we have covered world oil reserves, consumption and production, a
very sobering view regarding transportation and plastic uses. Now to a challenger of coal
and nuclear for electricity generation and heating - - natural gas. This graphic shows
World reserves of natural gas, with the red line
representing technical data - at 6.000 Tcf remaining reserves as of 2003.

Again it is important to distinguish estimates based on technical data from that
reported (published) for political, commercial or financial purposes.

There has indeed been growth in reported reserves, but the technical estimates are
little changed, as shown in the graph for conventional gas remaining reserves. Technical
reserves (red line on chart) are estimated as the mean
values (called proven + probable or 2P) and backdated to the year of discovery. The
world's remaining technical reserves have been substantially flat since 1980 at
about 6 000 Tcf (Tcf Å EJ), but the reported so-called Proved Reserves (current P) have
grown from 3000 Tcf in 1980 to 5200 Tcf in 2000.

I cannot identify the claimed recent findings that are said to have drastically changed
the perspectives. South Pars in Iran is reported as a 1991 find, but it is the extension
of North Field in Qatar found in 1971. So the whole field has to be attributed to 1971
(being the world's largest gas field by far) especially as the extension into Iran was
evident at an early stage. Much of what it attributed to new discovery is in fact
nothing more than the correction of poor initial estimates (constantly revised), termed
Proved.

The technical estimates of the world's conventional natural gas have been flattening
since 1980 as shown in the above graph (red line on
chart). It is estimated OECD countries together hold only 9% of proven reserves, whereas
the Middle East holds 41% and Russia alone 26%.

The data points 1950 to 2000 represent actual consumption. Beyond 2000 are projections
to 2100 by different authors, with modeling.

Note that the slope of the two upper extreme curves (AIG message and AIM) appear to
ignore actual past hard data of consumption, and are still zooming upward in 2100. These
scenarios imply that the amount of gas produced from 2000 to 2300 would be twenty times
the most likely technical estimate of the conventional and unconventional gas combined,
making them utterly implausible. The present world's gas production is not showing
any drastic change!

The lowest projection based on technical data (pink line - Laherre) shows a
consumption peak in 2030, declining thereafter - - and to the 2000 level by 2050. Only
the lowest (B1) scenario shows a reasonable fit with the past, with its peak 20 years
later, in 2050.

In the oil projections (charts above) we have seen the tendency of many 'experts' to
make 'political data' projections well beyond that supported by more sobering technical
data. This tendency to do the same regarding natural gas is quite apparent, thereby
rendering IPCC conclusions a dangerously misleading impression. It is evident that too
many have assumed a huge potential for gas supply which is not supported by the data,
having been misled by public data reported for political and financial purposes by
international and national oil companies.

Iran has what are estimated to be the world's second largest reserves of natural gas
after Russia. Iran is a place of enormous strategic importance to China, to Japan, to
Russia, to the European Union, and for all these reasons, to Washington as well. (link #45 - Dec. 2005)

INDICATED CONCLUSIONS REGARDING GAS:1. Natural gas world reserves are not increasing, despite massive search investments.
2. Government and private sectors must develop more reliable data regarding the future
based on hard technical data, AND stop assuming the 'sky is the limit.'
3. Based on actual historic consumption data of gas, and the past record of over-stating
reserves and potential new finds regarding oil, it must be concluded that projections for
future production/consumption should rely more on the technical data showing a decline
starting 2030 - - instead of relying on zooming, 'forever' gas.
4. Regarding electricity generation, those nations with large domestic coal reserves and
nuclear potential should not put all their electric generation investments and hopes into
natural gas - - unless, perhaps, they think they can beat each other to whatever natural
gas there is and when exhausted return to their domestic coal and nuclear.

Note European taxation is 5 times the USA rate. (adjusting this chart for the
appreciation of the Euro vs. the US dollar up to 2004 the European tax on this chart would
be about $2.80, 7 times higher than the US tax. and the UK tax about $3.92, nearly 10
times the US tax rate.)

However, it must be pointed out that government as a share of the economy is also
higher in Europe than the USA.

And, Europe and Japan have no oil reserves of their own - - therefore their import
ratios are also significantly higher than the USA.

Oil Sands in Canada - some point to so-called
oil sand deposits in Canada, believing such can help meet USA oil needs in coming years
right next door. The following statement points out oil sands offer nil to no relief (same
goes for oil shale in the U.S.):

"The bad news is that oil derived from these oil sands is extremely financially
and energetically intensive to extract and thus suffers from a horribly slow extraction
rate. Whereas conventional oil has enjoyed a rate of "energy return on energy
invested" - "EROEI" for short - of about 30 to 1, the oil sands rate of
return hovers around 1.5 to 1. This means that we would have to spend 15 times as much
money to generate the same amount of oil from the oil sands as we do from conventional
sources of oil. Where to find such a huge amount of capital is largely a moot point
because, even with massive improvements in extraction technology, the oil sands in Canada
are projected to only produce a paltry 2.2 million barrels per day by 2015. That's not
much oil considering we currently need 83.5 million barrels per day, are projected to need
120 million barrels per day by 2020." (see link #43by
Matt Savinar)

Regarding oil shale in the U.S.'s Colorado plateau, geologist Dr.
Walter Youngquist points out all attempts to get "oil" out of shale have failed
economically and due to the large amounts of water required in a water-short region. One
problem is there is no oil in oil shale. It is a material called kerogen. The shale has to
be mined, transported, heated to about 900 degrees F, and have hydrogen added to the
kerogen to make it flow. The shale pops like popcorn when heated so the resulting volume
of shale after the kerogen is taken out is larger than when it was first mined. The
disposal problem is large. Oil may be recoverable from shale but the net energy recovered
may not equal the energy used to recover it. If oil is "recovered" but at a net
energy loss, the operation is a failure. http://egj.lib.uidaho.edu/index.php/egj/article/view/2728/0

Game Playing Explained: "The simple reason for the huge reserve 'increase'
from 1985 to 1988 is that OPEC countries 'jumped' their reserve estimates in order to get
a higher quota, since quotas are established from the reserve numbers. It is funny to
see an OGJ report showing Kuwait increasing their reserves by 50% (64 Gb to 90 Gb) end
1984 and Saudi Arabia also jumping by about 50% (170 Gb to 255 Gb) end 1989, whereas the
Neutral Zone, owned half by both Kuwait and Saudi Arabia, did not increase at all (staying
at 5 Gb) since the two countries could not agree about the timing of the increase."

"As indicated above, the reason for the jump was the kind of cheating between OPEC
countries to get the most quotas by inflating their reserves, base of the computation of
the quotas (as population and population number are also manipulated, even more than
reserves)
By the way the UN estimated in 1990 Nigeria population at 122 millions as because the
fight between the different provinces everyone claimed to be big. The first census in 1991
showed only 88 millions : the estimate was wrong by 30%."

"Another more recent example is the South Pars gas field in Iran, which now
reports it has 18 Gb of condensate (it was 6 Gb last time). It is reported discovered in
1991 but everyone knows that it is the extension towards Iran of the North Field in Qatar
discovered in 1971, and it was drilled only in 1991 on the Iranian side because the lack
of market for gas. I corrected the date of discovery from 1991 to 1971." Jean Laherrère ).

The western world lives in a culture of growth and everyone hopes to see their
children having more in the future than they had in the past, but for the first time we
are not sure. Everyone would like to see the growth continue without obstruction, and hate
to speak about decline.

Politicians promise that growth will solve the present problems on welfare and
retirement, and they love to see the growing curve. They purposely do not want tell the
public about any data curve which displays a decline. In the interest of working
families and their children, politicians MUST fully reveal these truths and
uncertainties - - and never evade or 'wish away' bad news, as in the past. They must
stop promising 'a free lunch' of ever-expanding economic growth fueled by cheap and
ever-plentiful energy. The truth cannot hurt!!!

Certainly all data on the pages of this Energy Report, starting with its home page, unquestionably
reveal very serious and most troubling problems regarding energy supply to all nations
that do not produce more than they consume. Few can doubt that consumption must slow,
and the only effective mechanism for achieving this is that each importing nation should
not impose regulations which in any way restrain end user consumer prices.

Globalization Challenge to Energy - - Increased threats to U.S. supply will be
caused by increased competition for energy due to more rapid economic development of those
nations formerly controlled by the former soviet union - - the first being east
European nations affiliating with the European Union, as they consume more energy per
capita. The same goes for South East Asian and Latin American nations, Turkey, India,
Pakistan and the Balkans, and eventually African nations. China, already the
world's third largest consumer of oil, is experiencing significant economic
growth by its low cost, high export-driven manufacturing actions, causing it to become a
net importer of oil (up 18% in 2002). According to a January 2003 Chinese Academy of
Geological Science report, by 2020 China may be importing 70% of its oil
(including two-thirds of all oil shipped from the Persian Gulf, according to the Dept. of
Energy) and 50% of its natural gas consumption. With land access to oil from
Russia and the Middle East, China is rapidly developing its military forces AND
collaborating with Russia. The 2nd and 3rd largest industrial nations, Japan and Germany,
now import nearly 100% of their needed oil. Together all mentioned nations represent a
huge percentage of the world's population claiming their need for increased energy
consumption and living standards for their own people.

The U.S., with 5% of the world's population consumes 6 times more oil per capita
than the world at large, should take immediate steps to fully deregulate prices. A
full, free-market approach must be assured, subject only to monopoly laws. As a part of
this, all environmental regulations which hinder supply must be reassessed to assure each
is fully justified on both economic impacts as well as environmental ones. Such
deregulation will not only slow consumption by causing consumers and businesses to adjust
their ways, but will spur alternative energy types.

Not to take said actions promptly can place a nation's economic and national
security status in jeopardy regarding current and future generations.

As the French writer (and pilot) Antoine de Saint Exupery wrote : " We do no
inherit from our parents, we borrow to our children " Oil reserves are not unlimited
and we should be prepared for the decline of oil, and leave the maximum to our children by
trying to save energy as much as we can.

Governments must not grasp this energy challenge as an excuse to cause higher prices
through taxation (any more than with food) and thereby create unnatural distortions
while growing government in general. Limited
instead of expansive government, with individual responsibility, was the prime
principle of America's very wise founding fathers.

Lastly, we here repeat a statement made earlier in this report: 'We believe OPEC's middle
east nations should not be cast as villains, since it's their oil in their lands and
they have a perfect right to manage their reserves, pick their markets and maximize
revenue just like any business. It's up to large energy-deficit-consuming nations,
which are rapidly depleting their own reserves with their insatiable and unsustainable
appetites, to be responsible for their own 'dead-in' actions, respect producer rights
and not feel entitled to a 'free lunch' from resources owned by others.'